Co-operatives in Spain – Mondragon leads the way

The name of the small Basque town of Mondragon has, over the years, had something approaching talismanic status from British advocates of co-operative business looking for evidence to convince sceptics that coops really can work. The story of the co-operative which bears Mondragon’s name, originally a small manufacturer started in the bleak Franco period of the mid-1950s, continues to cast a powerful spell: the Mondragon Corporation today is an international cooperative business empire, employing over 85,000 people and operating across the globe, but still claiming to be run in strict accordance with co-operative principles.

"The Mondragon Corporation is based on a commitment to solidarity and on democratic methods for its organisation and management," says Mikel Lezamiz, director of Mondragon’s c-ooperative dissemination unit. Mondragon demonstrates an alternative to the ‘business as usual’ mantra of shareholder-owned companies, he maintains: "Our mission is not to earn money, it is to create wealth within society through entrepreneurial development and job creation."

Mondragon has grown to be the tenth largest business in Spain and it certainly dominates the Basque economy, historically one of the industrial powerhouses in the Spanish state. Having begun with the manufacture of domestic appliances, it continues to have a strong presence in the white goods industry (mainly under the brand name Fagor). It also has major interests in other areas of manufacture as diverse as bicycle production and lift manufacture (the latter including its UK Quality Lifts subsidiary, based in Wiltshire). It counts as its competitors firms such as Hitachi, Mitsubishi, GE and LG. Mondragon also has major interests in retailing, in finance (where it operates a savings bank and an insurer) and in education, where it operates schools, technical colleges and a cooperative university. There are also 14 research and development centres.

Given this breadth of activity, there are obvious questions to ask in relation both to Mondragon’s overall strategic management and corporate governance. Mondragon, in fact, operates less as a single corporate entity of the kind familiar from conventional multinational corporations and more as a network of more than 120 separate co-operative ventures, each of which are managed semi-autonomously. This means, for example, that workers in individual businesses within the Mondragon framework have the sort of rights of membership and control more often found in smaller workers’ cooperatives. Co-operative membership – and with it the right to benefit from profits – is usually open to employees after an initial six or twelve month period.

Mondragon has also explored some interesting models of stakeholder co-operative governance, an area where its ideas may prove to be valuable elsewhere in the world. Its retailer Eroski, for example, is jointly run by representatives of consumer members and employee members. Its schools and universities give formal governance roles not only to staff and students, but also to a wider group of stakeholders, including other co-ops and local authorities.

The individual co-operatives within Mondragon contribute financially to the Corporation’s development, exchange staff (particularly as an alternative to redundancies in one business) and jointly establish Mondragon’s strategy. This is done through the Co-operative Congress (650 delegates, representing each member firm) and the General Council it appoints. One interesting issue which Mondragon has begun to address is the way in which staff working in overseas subsidiaries can be included in the internal cooperative democracy. Mondragon was historically criticised by some for leaving these workers disempowered.

This is becoming more important as Mondragon Cooperative Corporation increasingly becomes a global business. International sales now represent 65% of total turnover. Its President José Maria Aldecoa talks of the cooperative’s " firm commitment to reinforcing Mondragon’s international business", both in Europe and in the BRIC countries of Brazil, Russia, India and China.

Mondragon also has something to teach other cooperatives in its approach to capital, always an issue for businesses not using equity-based capital markets. Employee members are required to make a financial investment in their business, typically of €14,000, which is automatically deducted from salary over the first three or five years of their membership. Profits paid across to members are also retained in the cooperative, being distributed only at retirement or if a member of staff leaves. Interest on members’ capital is paid, however, when businesses are profitable.

If Mondragon is a unique creation, the impulse which led to its development has also been at work elsewhere within Spain, particularly in the Basque country and Catalonia. The Basque coop confederation KONFEKOOP represents over 800 coops operating in the Basque autonomous region, whilst the equivalent Catalan body is the active Confederació de Cooperatives de Catalunya. Catalonia has over 5000 coops, in broad terms one in five of the total for Spain, and although they are predominantly small ventures (on average, employing about seven staff), they operate in many sectors, especially services and construction, but also in industry and agriculture. Proponents of cooperative schools in the UK may be interested in the Catalan experience, where about forty cooperative schools are currently operating.

Workers’ cooperatives– there are about 18,000 across Spain, together employing 300,000 people – have their own organisation in Coceta. Coceta, which has just celebrated its 25th birthday, points proudly to recent data from the Spanish state suggesting that coops have in total created 19,000 new jobs in the last quarter of last year. Coceta’s president Juan Antonio Pedreño says that coops are providing a valuable solution to Spain’s current chronic unemployment problems. "In moments of crisis, coops are capable of creating jobs while other forms of business are destroying them," he says.

More generally, cooperatives in Spain are seen as an important constituent part of the broader social economy, which also brings in not-for-profit associations and foundations. "The concept of the social economy is relatively strong in Spain, and cooperatives are seen as one of the key actors," says Klaus Niederlander, Director of Cooperatives Europe. The Spanish social enterprise association Cepes, analogous in some ways with Social Enterprise UK, is a member organisation of the International Cooperative Alliance.

Join our Newsletter

Social Entrepreneurs Network Scotland (Senscot) is registered as a Scottish charity under Scottish Charity No. SC029210 and as a limited company under Company Registration No. SC278156. It's registered office is at 21 Walker Street, Edinburgh, EH3 7HX.